Just a quick update on a long awaited US Federal Circuit decision on patent law issued last week. The case is called In Re Bilski (PDF), which addresses business method patents, of particular importance in the software, medical, and financial domains. In my view, it’s positive, because it constrains (v expands) what subject matter is patentable. At issue was whether mental processes that aren’t tied to something real could be patentable. The Federal Circuit – in an en banc decision – said no, “the claims are not directed to patent-eligible subject matter.” Claim 1 of the patent at issue is shown below:

“A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of: (a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer; (b) identifying market participants for said commodity having a counter-risk position to said consumers; and (c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.”

The Federal Circuit is the US appellate court responsible for patent matters in the US and sits between regional federal district courts and the Supreme Court. The case will likely be appealed to the Supreme Court, so more to come if the Supreme Court accepts the appeal, but for now, this is a positive step by the Federal Circuit. The Federal Circuit did not go so far as to say that business method patents as a whole are invalid or address software patents as a distinct category.

Below are some additional reports and analysis that may be of interest:

Interestingly, two of the dissenting opinions both argued that the decision stifled innovation, but for completely different reasons. Perspective is everything. Judge Mayer’s dissent argued that business method patents should be declared ineligible for patent protection because affording patent protection to business methods lacks constitutional and statutory support and hinders innovation. Conversely, Judge Newman argued that not protecting process inventions ignores the congressional mandate to promote useful arts and sciences. Dissents aren’t law, but they provide interesting insight into how jurists may respond to arguments in future cases.

On the downside, I don’t foresee that the decision will reduce the impact of software patents as a whole going forward. It certainly won’t make it worse, which it easily could have. But to comply with Bilski, patent applicants need only draft their claims slightly differently (as many already do) to include processors or some general purpose computer language in their claims. Thus, applicants will still seek and likely obtain patents on methods of manipulating and processing information, as long as they are tethered to a real machine or they arguably transform something real.

It seems the patent world lacks a negative teaching that explains why a field is not eligible to patent protection. The promotion of “useful arts and sciences” is an objective and you need to test first if that is really the case. Economical analysis would be required to take an informed choice.